Wednesday, June 22, 2022

Morning Note: Political Career Risk Rising -- And -- The Really Good News

Fed Chairman Jerome Powell addresses congress today and tomorrow with his team's current assessment of general conditions and their stance on go-forward monetary policy. 

While, given their all-out commitment (well rhetorically at least) to bringing inflation to its proverbial knees, one wouldn't expect much in the way of equity-market-friendly commentary right here from the Fed-Head.

But, then again, there's the likes of the following 4 charts:

The Bloomberg Commodity Index:

WTI (crude oil) Spot Price:

10-Year Treasury Yield:

The Atlanta Fed GDP Nowcast:

If one who's a tad bit economically-savvy were to wake from a 1-year coma and view just the above, one would conclude that the economy is reflecting some not-small risk of recession going forward. And, therefore, one would expect the Fed to, at a minimum, be easing a bit off the tightening pedal.

Now, keep in mind, my coma patient hasn't yet been privy to the following:

Headline Consumer Price Index:

Which pretty much explains this:

University of Michigan Consumer Sentiment Survey:

And if we substitute the word "consumer" with the word "voter", and we understand Mr. Powell to be one who tends to tell people what they want to hear, one would expect him to stay vigilant with his we'll-kill-that-inflation rhetoric.

Ah, but then again, recessions are the makers of failed reelection campaigns -- big time!! So, hmm... we may very well catch Powell backpedaling just a wee bit on the Fed's all-in stance on tightening, as it's his institution that seems to always catch the blame for causing those political career-killing recessions...

Stay tuned...

Asian whiffed overnight, with all of the 16 markets we track closing lower.

Pretty much the same for Europe so far this morning, all but 3 of the 19 bourses we follow are in the red.

US stocks are giving up a good chunk of yesterday's gains to start the session: Dow down 266 points (0.87%), SP500 down 0.87%, SP500 Equal Weight down 0.86%, Nasdaq 100 down 0.92%, Nasdaq Comp down 0.86%, Russell 2000 down 1.14%.

The VIX sits at 30.24, up 0.17%.

Oil futures are down 5.56%%, gold's up 0.81%, silver's down 0.75%, copper futures are down 3.13% and the ag complex (DBA) is down 0.28%.

The 10-year treasury is up (yield down) and the dollar is down 0.28%.

Among our 38 core positions (excluding options hedges, cash and short-term bond ETF), 9 -- treasury bonds, gold, AMD, emerging market bonds and AT&T -- are in the green so far this morning. The losers are being led lower by energy stocks, uranium miners, base metals miners, MP Materials and South Korean equities..

So, as I've been stating ad nauseam, we anticipate lower lows for stocks before the present market chapter comes to a close. The good news is, it'll indeed come to a close. And the really good news is that mostly bad news pervades present general sentiment... Seriously, no kidding:
"...a financial collapse has never happened when things look bad. On the contrary, macroeconomic flows look good before crashes. Before every collapse, economists say the economy is in the best of all worlds. Everything looks rosy, stock markets go up and up, and macroeconomic flows (output, employment, etc.) appear to be improving further and further. This explains why a crash catches most people, especially economists, totally by surprise. The good times are invariably extrapolated linearly into the future. Is it not perceived as senseless by most people in a time of general euphoria to talk about crash and depression?"

--Sornette, Didier. Why Stock Markets Crash
Have a great day!


  1. Thanks Marty! 3-month gas tax suspension is underway. However, this does not address the fundamental issue that refineries simply don't have the capacity to refine petroleum products since a lot of them switch to refining renewable energy. We are still in a bear market with existing risks.

  2. You bet Sam, and you're spot on with regard to present energy dynamics. Just add to your overall thesis the fact that, presently, refined product (gasoline and diesel) demand is back to where it was a year ago and far below where it was during 2017 to 2019 stretch...